The Pound surged against most major currencies during the early hours of today’s trading session, following positive OPEC discussions and political uncertainty around the Italian Referendum on Sunday.
The British Government have also signaled that continuing access to the single market is a real possibility with David Davis suggesting that the UK will continue to pay into the EU budget in exchange for market access.
Boris Johnson has also thrown support towards the concept of free movement of people, which differs from the Leave campaign’s rhetoric and Government’s stance towards hard Brexit.
EU officials have warned that the UK will not have access to the single market without free movement of people, and both Davis’ and Johnson’s comments suggest that a soft Brexit may still be at play.
Pound to Euro exchange rates hit 1.19
It remains unclear as to what the Government’s Brexit plans are, but initial clues suggest that single market access is still a likely outcome from June’s votes and markets remain optimistic towards a good deal for the UK. Theresa May faces a number of legal challenges next week which could result in Parliament having the final say over any Brexit terms.
It has also been suggested that the ECJ (European Court of Justic) will have a say over the invocation of Article 50.
Single Market access more likely
With pressure mounting on the Tory Government, and Parliament able to veto Brexit terms, Theresa May could be pushed towards a soft-Brexit or as Mark Carney has hinted at, a transitional Brexit to limit economic impact.
It’s clear that sentiment towards the Pound is changing in the wake of recent events, helped by political uncertainty elsewhere in Europe. The Italian Referendum on Sunday could further throw EUR/GBP off course, leading to a banking crisis and new government in Italy.
The political landscape is changing following the Brexit outcome and Donald Trump, which is causing a sell-off of the Euro ahead of the European elections next year.
In a twist of events, it could be the Pound that comes out on top with some banks now predicted Pound to Euro exchange rates above 1.20.
If the Italian’s vote against banking reforms on Sunday, rates of 1.20 could come earlier than expected.
